BoU explains Shs478b spent on Crane Bank

Kampala. Bank of Uganda (BoU) governor Emmanuel Tumusiime-Mutebile has explained how the Central Bank spent Shs478 billion shortly before it took over the management of Crane Bank.
Mr Mutebile, in response to this newspaper’s Monday story titled ‘How BOU Blew Shs478 billion in the Crane Bank takeover’, said the money in contention was a loan extended to save the then struggling Crane Bank and “this money came from BoU’s own resources”.

“Like any other Central Bank, [BOU] can create financial assets and liabilities. In this case, the BoU created a financial asset (the loan to Crane Bank), which was matched by an equivalent liability (an increase in the money supply),” Mr Mutebile said in a statement yesterday.
“In fact, the vast majority of this money - Shs466 billion – actually was liquidity support. Crane Bank had been losing liquidity for months prior to its takeover by BoU. This was because a large share of its loan portfolio was not being serviced by the borrowers and because customers were losing confidence in the bank and withdrawing their deposits,” he added.

Apart from the Shs466 billion liquidity support, Mr Mutebile said BoU also spent Shs12 billion in resolving Crane Bank.
He explained that the expenses were necessary to ensure that the bank’s assets and liabilities could be transferred to another bank and enable the former’s customers to continue accessing normal banking services.
The governor explained that BoU has since recovered Shs200 billion of the loan through the sale of assets and purchase of assumption transaction.

[email protected]